According to Kantar, a prominent global research firm, there are signs of a positive shift in the fast-moving consumer goods (FMCG) sector. This comes as the demand for everyday groceries and essential items recorded a 7.2% year-on-year growth during the September quarter.
Data from the research firm indicates that sales volume increased by 6.2% in rural markets and 8.4% in urban areas compared to the previous year.
Marico, the manufacturer of Parachute and Saffola oils, reported a promising beginning to the second quarter, observing rising demand patterns in both rural and urban regions in July. However, the company noted a significant decline in overall sentiment, particularly in rural areas, during August and early September.
This was prompted by inadequate rainfall, coupled with a surge in food prices.
“We have seen some recovery since the second half of September and we are optimistic about a gradual pick-up in consumption, with the onset of festive season, range-bound retail and food inflation, and government spending between now and the elections,” Marico managing director Saugata Gupta told investors on an earnings call recently.
Kantar keeps tabs on both branded and unorganized products, which even includes bulk, unpackaged commodities. In contrast, Nielsen primarily focuses on monitoring retail sales, with a strong emphasis on the branded category.
Furthermore, Kantar’s data comes with a one-quarter delay, as it examines real household consumption by volume and the primary sales made by companies to their distributors.
The expansion in the consumer goods segment was aided by the comparatively low figures from the previous year and increased consumption of high-volume product categories, particularly food items like atta. Surprisingly, last quarter’s growth was even higher, despite all the festive days this year falling within the December quarter. This differs from last year when some occurred between July and September.
“With each passing quarter, the gap between urban and rural is diminishing. So, it wouldn’t be a surprise if, by the end of the year, both the regions are at par,” said K Ramakrishnan, managing director, South Asia, Worldpanel division, Kantar. “It appears we are at the beginning of a turnaround for the sector that has been under some stress for the past few quarters.”
He mentioned that atta, a frequently purchased high-volume category, can exert a substantial influence on the FMCG sector, particularly in light of the government’s provision of free foodgrains, which can impact overall data.
Although all segments showed growth, the food and beverages category spearheaded the quarterly expansion at 8.7%, primarily driven by the demand for snacking and convenience products. When excluding atta, the overall market still saw substantial growth, with an increase of 4.2%.
Tata Consumer said sales were better during the quarter than a year ago despite the rural market stress. “We have seen an effect of inflation and erratic monsoons; we have seen an uptick on MGNREGA (the rural jobs programme),” said Sunil D’Souza, managing director at Tata Consumer. “But, that said, we have seen a jump in two-wheeler sales of late. So, we remain cautiously optimistic out there. We have guided for a mid-single digit volume growth, and we are more or less inching towards that, coming towards (it) faster… than the previous phase.”
Referring to NielsenIQ data, HUL reported that the FMCG market volume increased by 8% in the September quarter. Urban areas witnessed a 10% growth in volume, while rural areas experienced a 7% growth.
